Ashleay: Welcome to the IN YOUR INTEREST! podcast from iA Financial Group, where we discuss your need-to-know economic news and how it affects your finances. All this, in under 10 minutes. Many people may wonder: Responsible investing, also known as ESG, what is it really? My name is Ashleay. To answer this question, I'm here with my colleague, Sébastien Mc Mahon, Chief Strategist and Senior Economist at iA Financial Group. Hi, Sébastien.
Sébastien: Hey, Ashley.
Ashleay: Sébastien, can you tell us what sustainable investments really are?
Sébastien: Yes, sure. Sustainable investment is a way to invest that is in line with what we typically call the ESG criteria. When I say ESG, it's environment, social and governance. This goes beyond words. It's a way to conduct a business. It's a way to invest. It's a way that international relations are made. For example, Canadian oil producers, oil sands producers, have long been considered more polluting than other companies around the world. They've been left aside by some investors who say “Well, we have important principles on the environment, so we'd rather invest elsewhere”. Now with the Russia and Ukraine situation, we realize that "E" - environment is just one part of the equation. There is also the "S" and the "G", so it's all balancing out on exactly which companies, which sectors, what factors are we looking at to say that this is an interesting investment or not. The financial sector has an important role to play here as a transmission belt, and the idea is to encourage companies to change their practices through investments. Fund managers like us at iA are signatories of the Principles for Responsible Investments. iA is one of the signatories of that, and it is a commitment to integrate the ESG criteria in all investment decisions, to use the voting rights that we have from holding shares in these companies to enforce the criteria and to promote them, to name just a few aspects.
Ashleay: Right. Okay. Are these words or are these actual actions? Like, investing in ESG, is this something to ease our conscience? Is it something to feel good about ourselves?
Sébastien: No, it's not a fad. The Principles of Responsible Investment have been signed by over 3,000 fund managers worldwide, covering 103 trillion USD. That's 103 thousand billion dollars as of March 2020. It's pretty big. The investors are increasingly aware now of the impact that humans have on biodiversity, on the issues of equality, diversity, inclusion and, of course, good corporate governance.
Ashleay: Right. So it goes beyond just avoiding companies that make gas emissions, for example.
Sébastien: Yes, exactly. Some funds are specifically targeting individuals who want to make a difference in society. This is a way to help build a sustainable world, to support environmental values, good governance, women's representation and diversity in corporate executives. I mean, to name just a few. Socially responsible investment funds reward good business practices and encourage lesser performers to follow suit. These funds are more accessible than ever, making an impact on our lives and business decisions without compromising the returns to investors.
Ashleay: Right. Ok, I think we can all understand those principles, but if we want to help make a difference, invest in this - is it easy to choose the right funds?
Sébastien: Yes, it's easy to choose. Just talk to your financial advisor. There are just so many options now for impact investing, for responsible investing. You have all of these options out there, whether you're an aggressive investor or a more passive investor, there are going to be funds out there that are able to allow you to reflect your values through your investment.
Ashleay: Right, so these funds could hold shares of oil companies even though these same oil companies could be historically considered polluters.
Sébastien: Yes, of course, the idea here is for the investor to give an incentive to corporate citizens to become better corporate citizens, so to pollute less or to come up with innovation on how they can have a smaller footprint on planet Earth, to address social issues better. We call that impact investing. Using our right to vote, that comes with holding shares, to force or to encourage some real changes in the behaviour of these companies. And just to give you an idea, there are a lot of opportunities, lots of ways to invest in that. And in the first quarter of 2022, responsible funds accounted for $1.7 billion of sales in Canada. That's about 2% of the total sales of funds in the country in the first quarter.
Ashleay: Okay, perfect. And what's our target audience for ESG?
Sébastien: Of course, target audience - it's everyone. If you have some values that you want to see reflected in your investments, the ESG funds are there for everyone. Right now, the trend that we're seeing is that the younger generations, they're very sensitive to environmental, social and governance issues. We're also seeing maybe some grandparents that are investing for the RESPs of their grandchildren. They want to see these values reflected in the investments, too. There's a lot of that. But we're seeing growth in all the demographic groups right now.
Ashleay: Really interesting. Well, thanks again for being here, Sébastien. I'll see you next time.
Sébastien: Sure. Thank you.
Ashleay: Love this podcast? Want to know more about economic news? Follow our IN YOUR INTEREST! podcast, available on all platforms. Visit the economic news page on ia.ca or follow us on social media.